The State of Small Business 1995

Watching the changes taking place in American business from our perspective here at Inc., I often feel as if I am watching a grand economic mystery story unfold -- a story in which virtually all the received wisdom about the dynamics of the economy turns out to be wrong, in which every new discovery about how our economic system works leads to numerous unexplored questions, in which the most reliable method of economic detection often is to walk the streets and look around. For 15 years now, Inc. has been chronicling the disappearance of an old economic order and the emergence of a new economy. We've explored the principal agents of this transformation, including technology and the globalization of markets, capital, and labor. We've documented how entrepreneurial organizations are reshaping the arenas of competition and how they, in turn, are being reshaped by the environment in which they operate. Recently, we concluded that it was time to create a more detailed annual report on the state of the small-business economy.

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Welcome to "Wonderland" In creating the premier issue of The State of Small Business, we've assembled a group of contributors that includes the most original and provocative minds to be found when it comes to divining the contours and implications of a continually transforming economy. John Case takes us on a tour of the dynamic, chaotic, and elusive small-business marketplace in "The Wonderland Economy" ( [Article link]). No one is a more insightful tour guide. Case has been a senior editor and writer at Inc. for 12 years now. His book From the Ground Up: The Resurgence of American Entrepreneurship (Simon & Schuster, 1992) is considered by many to be the best treatment yet of the sweeping changes that have been occurring in the economy as a result of entrepreneurial business.

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Who's Who Much of what we know about the entrepreneurial economy is the modest legacy of a new generation of economic researchers. Karen Carney, a reporter for Inc. magazine and formerly a financial analyst at the investment banking firm Alex. Brown & Sons, has assembled a guide to those pioneers in "Who's Who in Small-Business Research" ( [Article link]). While you won't know many of these pioneering researchers by name, the influence of their work has already begun to reshape our thinking about how our economy works.

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New Tools of the Research Trade David Friedman is an economic-development specialist, a research fellow at the Massachusetts Institute of Technology Japan Program, and a partner in the Los Angeles law firm of Tuttle & Taylor. He is a frequent con-tributor to the Los Angeles Times, and hiis commentaries have appeared in the Washington Post, the Wall Street Journal, and the New York Times. He also contributed to the book Regionalism and Rivalry (University of Chicago Press, 1994), which analyzes U.S.-Japanese bilateral technology-development issues. In "Job Detection" ( [Article link]), Friedman introduces us to a world in which new businesses defy categorization and elude traditional economic radar, rendering the tools of traditional economic research useless.

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Entrepreneurial Life on the Edge Two-time Pulitzer Prize nominee Joel Garreau instructs us in the art of taking the entrepreneurial pulse of our own communities by, well, walking the streets, in "A Field Guide to Your Local Economy" ( [Article link]). He is the author of the book Edge City: Life on the New Frontier (Doubleday, 1991) and a staff writer at the Washington Post. Garreau is also a principal in the Edge City Group, which partners with a variety of public- and private-sector organizations to improve the quality of edge cities worldwide.

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On-Line Jobs Debate For those of you who prefer to stroll on the information superhighway, check out "Small Is Beautiful! Big Is Best!" ( [Article link]), an on-line "debate" about who's really generating jobs. We staged a discussion over several months with four leading thinkers, each of whom has a unique perspective on economic creation. Our on-line participants included Bennett Harrison of Harvard University, Steven Davis of the University of Chicago, Paul Reynolds of Marquette University, and Zoltan Acs of the University of Maryland.

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Complex Capitalism If we are just beginning to explore the process by which our economic system continually regenerates itself, we are likewise in the earliest stages of understanding what will be required of us if we are to prosper in the new economy. The cumulative effect of rapid change on our organizations, explains Inc. senior writer Edward Welles, is to make even the newest and smallest businesses infinitely more complex. In "There Are No Simple Businesses Anymore" ( [Article link]), Welles documents the impact of the new complexity on Kiva Container, a third-generation family business struggling to adapt to an environment in which there is much more to gain, to keep track of, and to lose than there used to be -- a world in which the old managerial rules are obsolete. Welles is no newcomer to the theme of economic complexity. His article "It's Not the Same America" ( Inc., May 1994) assessed the impact of economic complexity on our nation's poor and was nominated for a National Magazine Award.

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Rewriting the Rules As useful rules for managing in the new economy emerge, James Collins will surely be among the most insightful rule writers. Collins is coauthor of Built to Last: Successful Habits of Visionary Companies (HarperBusiness, 1994), a book I referred to recently as the In Search of Excellence of the 1990s. Collins is also a recipient of the Distinguished Teaching Award at the Stanford University Graduate School of Business. His work has been featured in Inc., The Economist, Fortune, and the Harvard Business Review. In "Building Companies to Last" ( [Article link]), Collins explores the six timeless fundamentals that are practiced by visionary companies and that, says Collins, become more important, not less so, in times of rapid change.

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The Design of Everyday Work The impact of the new economy on everyday work is the focus of "A Nation of Owners" ( [Article link]), by William Bridges, a renowned speaker, author, and trainer in the field of organizational development. His book JobShift: How to Prosper in a Workplace Without Jobs (Addison-Wesley, 1994) is scheduled to be the subject of a Public Broadcasting Service special later this year.

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Policy and Poverty in the New Economy While businesspeople struggle to adapt to a 21st century that appears to have arrived a decade ahead of schedule, the gap between regulators and the business world they regulate grows at an ever-accelerating pace, says Tom Richman. Richman was a senior writer at Inc. from its launch in 1979 through 1991, writing about the politics of small business from Washington, D.C., and about the enabling power of information technology in business innovation. Lately, he has been a contributing editor to the Harvard Business Review and a consultant on several best-selling business books, including Michael Hammer and James Champy's Reengineering the Corporation (HarperBusiness, 1993) and Michael Treacy and Fred Wiersema's The Discipline of Market Leaders (Addison-Wesley, 1995). In "What Does Business Really Want from Government?" ( [Article link]), Richman explores what government might look like on the other side of "reinvention."

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21st-Century Urban Renewal In our new economy, whole segments of the population are in danger of falling through the cracks. No-where is this more evident than in our nation's inner cities. Yet even here, argues contributor Michael Porter, one can identify both reasons for hope and the elements of a solution. Porter teaches at Harvard Business School and is the leading authority on competitive strategy and economic competitiveness. He is the author of 14 books, including The Competitive Advantage of Nations (Free Press, 1990). In "The Rise of the Urban Entrepreneur" ( [Article link]), he examines the failures of existing urban policy and lays out a blueprint for the economic revitalization of our cities -- perhaps the most significant challenge confronting our nation on the brink of a new millennium.